Your Customers Should Come First

Remember that you work for homebuyers — not real estate agents

By Andy W. Harris, president and owner, Vantage Mortgage Group Inc. | bio

There’s been a historical trend in the mortgage industry of
brokers and bankers spending the majority of their time chasing down real
estate agents for business, and in the process spending surprisingly little
time on attracting the actual consumers that employ them. Getting referrals
from real estate agents can be an important aspect of originating loans, but
those relying on them for the majority of their production are in danger of
putting these business relationships before the best interests of their
clients.

This needs to change, considering the negative impact it may
have on the mortgage industry and the consumers that it claims to serve. Real
estate agents play an important role in the homebuying process, and it’s
usually wise for buyers and sellers to have representation and contractual
protection. Although the role of agents is important, there is nothing more
important to consumers than the mortgage process and the long-term debt
liability that comes with buying real estate.

Not only does the mortgage process control the transaction
for the buyers and sellers in a noncash home purchase, but consumers also face
one of the biggest financial responsibilities and commitments of their
lifetime. When the home-purchase honeymoon is over, the reality finally sets in
on the marriage to the mortgage. What this means is that your role and counsel
is the most important part of the process for a consumer buying real estate and
must be treated as such by all parties.

The problem in focus

Looking at real estate is more exciting for consumers than
budgeting and analyzing mortgage options for pre-approval, which is where the
industry’s problematic focus on real estate agents begins. There is nothing
wrong with consumers getting excited about the homebuying process, but
unfortunately this may result in new buyers meeting with real estate agents
before they meet with mortgage lenders.

It’s often unwise for consumers to rely exclusively on their
agents for lender referrals, because these agents may know little about their
consumers and their financial stories. Not only is this a bad decision due to
omitting pre-approval and appropriate budgeting, it may also lead to less
desirable terms and a potentially bad experience if the homebuyer’s real estate
agent does not follow best business practices. Relying on a sole referral with
the potential for special interests over credential review, self-education and
comparison shopping is not a prudent financial decision.

Unfortunately, some real estate agents do not understand —
or even care to understand — the analytics in the primary mortgage market and
what each channel means to their clients. This simply cannot continue; the
basic details of mortgage lending must be clear for the sake of consumers
entering the housing market who rely on their agents’ advice.

Ultimately, every professional involved in the homebuying
process must be accountable and responsible for consumer interaction.
Originators should strive to work with agents who refer their clients, on
average, to at least three mortgage providers that they trust and have worked
with successfully. This will help your real estate partners to protect
themselves should a bad experience arise, but even more so it protects the best
interests of homebuyers through diversity, competition and choice.

The right partners

Related to all this, the mortgage industry is currently facing
a huge problem when it comes to phony marketing agreements, joint ventures and
Section 8 violations of the Real Estate Settlement Procedures Act. A shocking
number of businesses in the housing sector continue to steer consumers toward
higher-cost, lower-quality mortgage providers for financial gain. There is
certainly a moral and ethical issue that the mortgage industry is facing, but
more importantly, these activities are illegal and detrimental to consumers.

When targeting real estate agents to work with, originators
should make sure that their partners share a client-first business platform.
Everyone knows what it’s like working with a bad agent or those who believe
that they can bark out orders that defy common sense or the factual conditions
of a loan transaction. It’s a good idea to pull data on recent production and
do research on the credentials or customer complaints of agents you work with
to confirm that they are full-time, committed professionals. This will help you
prepare for those agents who might get wrapped up in their own balance sheets
and commission over all else.

Make no mistake: There are some excellent real estate
professionals in the market. Good real estate agents understand and respect the
importance of the mortgage process for the consumer and never enter into
questionable marketing agreements or accept financial incentives for referrals.
Although real estate agents offer a service, mortgage professionals offer a
service and a financial product. This is where consumer protection applies and
why it’s such a crucial aspect of the origination business.

Tips for success

According to the National Association of Realtors (NAR), in
2013, 92 percent of homebuyers used the Internet at some point in their real
estate searches, and 42 percent of them turned to the Internet as the very
first step in the homebuying process. Consumers, in other words, are getting
more access to data online than ever before.

Service professionals relying on commissions must sharpen
their online skills, have a broad level of experience, and communicate their
services and products to attract these well-informed consumers. Originators
must embrace and support consumer education and awareness, but also manage and
control public data to ensure that accuracy and integrity exist.

Technology and consumer self-education are already changing
how real estate is bought and sold, and this trend will doubtlessly continue in
the future. Embracing technology and following these statistical trends is
vital in preparing for the market’s new generation of homebuyers. If you fail
to prepare, you’ll be left in the dust by those who technologically adapted
their marketing and operations. Originators must also educate consumers about
starting the mortgage process by seeking out a lender before a real estate
agent, which thankfully seems to be a growing trend.

Brokers and bankers should diversify their referrals and
refrain from submitting or relying predominately on real estate agents. To
achieve a more enjoyable and sustainable business, don’t get wrapped up in
tailoring your marketing plan around real estate agents, and focus instead on
the consumers that you want to influence. Have access to the products and
pricing you need to be competitive, and don’t be sold the snake oil from certain
unscrupulous recruiters and managers.

Finally, work to influence your database and the public both
online and offline via reviews and general accessibility. Your own clients can
help you build your brand, stimulating activity via their workplaces, families
and circles of friends. If you simply put your interests in line with your
client’s best interests, a favorable outcome is inevitable.

• • •

In a mortgage transaction, authority ultimately rests with
the consumer — the only person who dictates who they hire. Nothing is more
important than the consumer during the homebuying process. The minute any
industry professional loses sight of this through appeasing a referral source,
applying pressure, steering customers for financial gain or simply making
excuses, this professional needs to exit the industry, having no right to be
involved with such an important financial transaction. There is too much at
stake for the consumer, and integrity should be treated at all times as
aprerequisite for the origination profession.

Andy W. Harris is president and owner of Oregon-based Vantage Mortgage Group Inc. and past president of the Oregon Association of Mortgage Professionals (OAMP). He also currently serves on the board of directors with NAMB — The Association of Mortgage Professionals. Reach Harris at (877) 496-0431, ext. 302, or at aharris@vantagemortgagegroup.com. Visit AndyWHarris.com or VantageMortgageGroup.com.